IDEAS home Printed from https://ideas.repec.org/p/tor/tecipa/tecipa-410.html
   My bibliography  Save this paper

Learning and Knowledge Diffusion in a Global Economy

Author

Listed:
  • Kunal Dasgupta

Abstract

I develop a dynamic general equilibrium model to understand how multinationals affect host countries through knowledge diffusion. Workers in the model learn from their managers and knowledge diffusion takes place through worker mobility. Unlike in a model without learning, I present a novel mechanism through which an integrated equilibrium represents a Pareto improvement for the host country. I go on to explore other dynamic consequences of integration. The entry of multinationals makes the lifetime earning profiles of host country workers steeper. At the same time, if agents learn fast enough, integration creates unequal opportunities, thereby widening inequality. The ex-workers of foreign multinationals also found new firms which are, on average, larger than the largest firms under autarky.

Suggested Citation

  • Kunal Dasgupta, 2010. "Learning and Knowledge Diffusion in a Global Economy," Working Papers tecipa-410, University of Toronto, Department of Economics.
  • Handle: RePEc:tor:tecipa:tecipa-410
    as

    Download full text from publisher

    File URL: https://www.economics.utoronto.ca/public/workingPapers/tecipa-410.pdf
    File Function: Main Text
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jonathan E. Haskel & Sonia C. Pereira & Matthew J. Slaughter, 2007. "Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms?," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 482-496, August.
    2. Steven Klepper & Sally Sleeper, 2005. "Entry by Spinoffs," Management Science, INFORMS, vol. 51(8), pages 1291-1306, August.
    3. Bernard, Andrew B. & Bradford Jensen, J., 1999. "Exceptional exporter performance: cause, effect, or both?," Journal of International Economics, Elsevier, vol. 47(1), pages 1-25, February.
    4. Markusen, James R. & Venables, Anthony J., 1999. "Foreign direct investment as a catalyst for industrial development," European Economic Review, Elsevier, vol. 43(2), pages 335-356, February.
    5. Aitken, Brian & Harrison, Ann & Lipsey, Robert E., 1996. "Wages and foreign ownership A comparative study of Mexico, Venezuela, and the United States," Journal of International Economics, Elsevier, vol. 40(3-4), pages 345-371, May.
    6. April Mitchell Franco & Darren Filson, 2000. "Knowledge Diffusion through Employee Mobility," Claremont Colleges Working Papers 2000-61, Claremont Colleges.
    7. Gene M. Grossman & Elhanan Helpman, 2003. "Outsourcing Versus FDI in Industry Equilibrium," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 317-327, 04/05.
    8. Pol Antràs & Luis Garicano & Esteban Rossi-Hansberg, 2006. "Offshoring in a Knowledge Economy," The Quarterly Journal of Economics, Oxford University Press, vol. 121(1), pages 31-77.
    9. Keller, Wolfgang, 1998. "Are international R&D spillovers trade-related?: Analyzing spillovers among randomly matched trade partners," European Economic Review, Elsevier, vol. 42(8), pages 1469-1481, September.
    10. Ragnhild Balsvik, 2011. "Is Labor Mobility a Channel for Spillovers from Multinationals? Evidence from Norwegian Manufacturing," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 285-297, February.
    11. Fosfuri, Andrea & Motta, Massimo & Ronde, Thomas, 2001. "Foreign direct investment and spillovers through workers' mobility," Journal of International Economics, Elsevier, vol. 53(1), pages 205-222, February.
    12. April Mitchell Franco & Darren Filson, 2006. "Spin‐outs: knowledge diffusion through employee mobility," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 841-860, December.
    13. Glass, Amy Jocelyn & Saggi, Kamal, 2002. " Multinational Firms and Technology Transfer," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(4), pages 495-513, December.
    14. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 1-9.
    15. Kremer, M & Maskin, E, 1996. "Wage Inequality and Segregation by Skill," Working papers 96-23, Massachusetts Institute of Technology (MIT), Department of Economics.
    16. Michael Kremer, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 551-575.
    17. Holger Görg & Eric Strobl, 2016. "Spillovers from Foreign Firms through Worker Mobility: An Empirical Investigation," World Scientific Book Chapters,in: MULTINATIONAL ENTERPRISES AND HOST COUNTRY DEVELOPMENT, chapter 13, pages 243-259 World Scientific Publishing Co. Pte. Ltd..
    18. Sofronis K. Clerides & Saul Lach & James R. Tybout, 1998. "Is Learning by Exporting Important? Micro-Dynamic Evidence from Colombia, Mexico, and Morocco," The Quarterly Journal of Economics, Oxford University Press, vol. 113(3), pages 903-947.
    19. Sattinger, Michael, 1993. "Assignment Models of the Distribution of Earnings," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 831-880, June.
    20. Pol Antràs, 2003. "Firms, Contracts, and Trade Structure," The Quarterly Journal of Economics, Oxford University Press, vol. 118(4), pages 1375-1418.
    21. Abowd, John M. & Kramarz, Francis, 1999. "The analysis of labor markets using matched employer-employee data," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 40, pages 2629-2710 Elsevier.
    22. Lorne Carmichael, 1983. "Firm-Specific Human Capital and Promotion Ladders," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 251-258, Spring.
    23. Griffith, Rachel & Redding, Stephen J. & Simpson, Helen, 2002. "Productivity Convergence and Foreign Ownership at the Establishment Level," CEPR Discussion Papers 3765, C.E.P.R. Discussion Papers.
    24. William R. Kerr, 2008. "Ethnic Scientific Communities and International Technology Diffusion," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 518-537, August.
    25. Aw, Bee Yan & Chung, Sukkyun & Roberts, Mark J, 2000. "Productivity and Turnover in the Export Market: Micro-level Evidence from the Republic of Korea and Taiwan (China)," World Bank Economic Review, World Bank Group, vol. 14(1), pages 65-90, January.
    26. Ariel T. Burstein & Alexander Monge-Naranjo, 2009. "Foreign Know-How, Firm Control, and the Income of Developing Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 124(1), pages 149-195.
    27. Nicholas Bloom & John Van Reenen, 2010. "Why Do Management Practices Differ across Firms and Countries?," Journal of Economic Perspectives, American Economic Association, vol. 24(1), pages 203-224, Winter.
    28. Wolfgang Keller, 2002. "Geographic Localization of International Technology Diffusion," American Economic Review, American Economic Association, vol. 92(1), pages 120-142, March.
    29. Boyan Jovanovic & Rafael Rob, 1989. "The Growth and Diffusion of Knowledge," Review of Economic Studies, Oxford University Press, vol. 56(4), pages 569-582.
    30. Wolfgang Keller & Stephen R. Yeaple, 2009. "Multinational Enterprises, International Trade, and Productivity Growth: Firm-Level Evidence from the United States," The Review of Economics and Statistics, MIT Press, vol. 91(4), pages 821-831, November.
    31. Elhanan Helpman & Oleg Itskhoki & Stephen Redding, 2010. "Inequality and Unemployment in a Global Economy," Econometrica, Econometric Society, vol. 78(4), pages 1239-1283, July.
    32. Nikolaj Malchow-Møller & James R. Markusen & Bertel Schjerning, 2013. "Foreign Firms, Domestic Wages," Scandinavian Journal of Economics, Wiley Blackwell, vol. 115(2), pages 292-325, April.
    33. Pol Antras & Elhanan Helpman, 2004. "Global Sourcing," Journal of Political Economy, University of Chicago Press, vol. 112(3), pages 552-580, June.
    34. Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
    35. Andres Rodriguez-Clare, 2007. "Trade, Diffusion and the Gains from Openness," NBER Working Papers 13662, National Bureau of Economic Research, Inc.
    36. Sherwin Rosen, 1982. "Authority, Control, and the Distribution of Earnings," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 311-323, Autumn.
    37. Beata Smarzynska Javorcik, 2004. "Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers Through Backward Linkages," American Economic Review, American Economic Association, vol. 94(3), pages 605-627, June.
    38. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 451-471, June.
    39. Rodriguez-Clare, Andres, 1996. "Multinationals, Linkages, and Economic Development," American Economic Review, American Economic Association, vol. 86(4), pages 852-873, September.
    40. Paul Beaudry & Patrick Francois, 2010. "Managerial Skills Acquisition and the Theory of Economic Development," Review of Economic Studies, Oxford University Press, vol. 77(1), pages 90-126.
    41. repec:hrv:faseco:4784031 is not listed on IDEAS
    42. Wolfgang Keller, 2004. "International Technology Diffusion," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 752-782, September.
    43. Pinelopi Koujianou Goldberg & Nina Pavcnik, 2007. "Distributional Effects of Globalization in Developing Countries," Journal of Economic Literature, American Economic Association, vol. 45(1), pages 39-82, March.
    44. Van Biesebroeck, Johannes, 2005. "Exporting raises productivity in sub-Saharan African manufacturing firms," Journal of International Economics, Elsevier, vol. 67(2), pages 373-391, December.
    45. Hashimoto, Masanori, 1981. "Firm-Specific Human Capital as a Shared Investment," American Economic Review, American Economic Association, vol. 71(3), pages 475-482, June.
    46. Robert Lipsey & Fredrik Sjöholm, 2004. "FDI and wage spillovers in Indonesian manufacturing," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 140(2), pages 321-332, June.
    47. Markusen, James R. & Trofimenko, Natalia, 2009. "Teaching locals new tricks: Foreign experts as a channel of knowledge transfers," Journal of Development Economics, Elsevier, vol. 88(1), pages 120-131, January.
    48. Steven Klepper, 2002. "The capabilities of new firms and the evolution of the US automobile industry," Industrial and Corporate Change, Oxford University Press, vol. 11(4), pages 645-666, August.
    49. Franziska Ohnsorge & Daniel Trefler, 2007. "Sorting It Out: International Trade with Heterogeneous Workers," Journal of Political Economy, University of Chicago Press, vol. 115(5), pages 868-892, October.
    50. repec:hrv:faseco:4784029 is not listed on IDEAS
    51. Prescott, Edward C & Boyd, John H, 1987. "Dynamic Coalitions: Engines of Growth," American Economic Review, American Economic Association, vol. 77(2), pages 63-67, May.
    52. Luis Garicano, 2000. "Hierarchies and the Organization of Knowledge in Production," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 874-904, October.
    53. repec:pri:rpdevs:deaton_dreze_poverty_india is not listed on IDEAS
    54. Jennifer P. Poole, 2013. "Knowledge Transfers from Multinational to Domestic Firms: Evidence from Worker Mobility," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 393-406, May.
    55. Holmes, Thomas J & Schmitz, James A, Jr, 1990. "A Theory of Entrepreneurship and Its Application to the Study of Business Transfers," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 265-294, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Konstantins Benkovskis & Jaan Masso & Olegs Tkacevs & Priit Vahter & Naomitsu Yashiro, 2017. "Export and productivity in global value chains: Comparative evidence from Latvia and Estonia," OECD Economics Department Working Papers 1448, OECD Publishing.
    2. Stoyanov, Andrey & Zubanov, Nikolay, 2014. "The distribution of the gains from spillovers through worker mobility between workers and firms," European Economic Review, Elsevier, vol. 70(C), pages 17-35.
    3. Serafinelli, Michel, 2013. "Good Firms, Worker Flows and Productivity," MPRA Paper 49055, University Library of Munich, Germany, revised 12 Aug 2013.
    4. Wolf, Katja & Stockinger, Bastian, 2016. "The productivity effects of worker mobility between heterogenous firms," Annual Conference 2016 (Augsburg): Demographic Change 145750, Verein für Socialpolitik / German Economic Association.
    5. Michel Serafinelli, 2015. "'Good' Firms, Worker Flows and Local Productivity," Working Paper series 15-29, Rimini Centre for Economic Analysis.
    6. Patnaik, Ila & Pundit, Madhavi, 2014. "Is India's Long-Term Trend Growth Declining?," ADB Economics Working Paper Series 424, Asian Development Bank.
    7. Nimczik, Jan Sebastian, 2017. "Job Mobility Networks and Endogenous Labor Markets," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168147, Verein für Socialpolitik / German Economic Association.
    8. Liu, Qing & Lu, Ruosi & Zhang, Chao, 2014. "Entrepreneurship and spillovers from multinationals: Evidence from Chinese private firms," China Economic Review, Elsevier, vol. 29(C), pages 95-106.
    9. Michaud, Amanda & Rothert, Jacek, 2014. "Optimal borrowing constraints and growth in a small open economy," Journal of International Economics, Elsevier, vol. 94(2), pages 326-340.
    10. Patnaik, Ila & Pundit, Madhavi, 2016. "Where is India's Growth Headed?," Working Papers 16/159, National Institute of Public Finance and Policy.
    11. Ila Patnaik, 2016. "Where is India’s Growth Headed?," Working Papers id:8436, eSocialSciences.
    12. Grigorios Spanos, 2015. "Sorting Within and Across French Production Hierarchies," AMSE Working Papers 1524, Aix-Marseille School of Economics, Marseille, France.
    13. Jaan Masso & Priit Vahter, 2016. "Knowledge Transfer From Multinationals Through Labour Mobility: Learning From Export Experience," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 99, Faculty of Economics and Business Administration, University of Tartu (Estonia).
    14. Sampson, Thomas, 2013. "Brain drain or brain gain? Technology diffusion and learning on-the-job," Journal of International Economics, Elsevier, vol. 90(1), pages 162-176.
    15. Sampson, Thomas, 2012. "Brain drain or brain gain? Technology diffusion and learning on-the-job," LSE Research Online Documents on Economics 51503, London School of Economics and Political Science, LSE Library.
    16. Stoyanov, Andrey & Zubanov, Nick, 2013. "Money on the Table? Firms' and Workers' Gains from Productivity Spillovers through Worker Mobility," IZA Discussion Papers 7702, Institute for the Study of Labor (IZA).
    17. Thomas Sampson, 2012. "Brain Drain or Brain Gain? Technology Diffusion and Learning On-the-job," CEP Discussion Papers dp1168, Centre for Economic Performance, LSE.
    18. Grigorios Spanos, 2015. "Sorting Within and Across French Production Hierarchies," Working Papers halshs-01163607, HAL.
    19. Monge-Naranjo, Alexander, 2016. "Markets, Externalities, and the Dynamic Gains of Openness," Working Papers 2016-23, Federal Reserve Bank of St. Louis, revised 01 Nov 2016.

    More about this item

    Keywords

    Multinationals; knowledge diffusion; learning; worker mobility; Pareto improvement; spin-offs.;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tor:tecipa:tecipa-410. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (RePEc Maintainer). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.